Family affairs: How CEO Robert Buchbauer and Swarovski is going to break the internet

Crystal giant Swarovski reported a €3.08 billion turnover in 2012 and CEO Robert Buchbauer has even bigger plans for the company originally founded by his great-great-grandfather. In this exclusive, FELLT Editor-at-Large Daniel Kjellsson meets with Mr Buchbauer to discuss entrepreneurship and acquisitions, epic failures and how he digitalised a five-generation-old global brand.

Robert Buchbauer

As the great-great-grandchild of Daniel Swarovski, founder of the crystal brand, Robert Buchbauer has been surrounded by crystals his whole life. Robert studied Business and Management at Leopold-Franzens University in Innsbruck, and at the University of California, Berkeley.

Who

Robert Buchbauer

What

CEO and member of the executive board at Swarovski. Avid skier

Where

Paris, France

Daniel Kjellsson

How do you think your everyday decision-making is affected by also carrying five generations worth of expectation and tradition?

Robert Buchbauer

Swarovski is 100% family owned and all shareholders want it to stay that way. That obviously has implications. We need to be more disciplined than others and retain our current good margins but we are also in a very independent financial situation which means there is pressure to stay a bit less daring at times. We cannot go out and buy revenue, so to speak. We have to build a proper solid business with a real cash-flow and I think this is the right route for the Swarovski family.

Many premium brands struggled and are still struggling through digitalisation. Swarovski were early and you took over the responsibility for developing the e-commerce store in 1998 and all digital operations in 2001. Was it initially hard to envision the Swarovski brand coming to life on a screen?

Initially there was a lot of internal resistance. People were afraid of the uncontrollable aspects of online branding and afraid the risks of competing internally with our offline distribution. I pushed it through anyway and in 2001 we launched the first Swarovski e-commerce store. Even then the same people came to me with various reports and articles saying that the strategy was the wrong thing to do and that we chose the wrong route. By breaking the offline mold the e-commerce store has proven to be very successful and highly profitable for Swarovski. We’re complementing the physical stores, not replacing them.

Let’s be honest, In 2001 the Internet didn’t look very good. Did you have any hesitations when seeing how Swarovski was presented in pixels?

Never, although there were a lot of challenges. The technology wasn’t where it is today so it was tough to show our products in a way that was attractive. Very early on we tried to work with high-resolution images that the client could zoom into and other techniques but normally they weren’t able to see anything at all due to the slow internet connections of the time. Our system actually made the experience worse! As technologies caught up we tried each new one and used the ones that complemented our user experience. The platform took longer to become profitable than originally planned but is now more profitable than we ever anticipated.

What do you believe is the largest threat to a premium brand heading into digital?

You have to play by different rules. It’s obviously faster and consumers expect you to act immediately. At the same time it’s a completely different service you deliver. It took us a lot of time to learn what it actually takes to play in the new role and on a new channel. The good thing with being early online is that you could make a lot of mistakes and no-one judged you based on them. Today you can’t afford a lot of mistakes as it’s more competitive.

Looking at the launch of the men’s range, watch collection, sunglasses and now the architectural concept you seem to be fond of product development. Do you expect Swarovski to continue to grow this way by entering new product segments?

This is the way we will keep telling stories. You need to keep your offering interesting by the things you put around it. Our jewellery is our core, it has grown quite dramatically for the last decade and now represents about 75% of the business. To have one product category just isn’t enough to keep consumers interested and excited. With all those additional categories we were able to create a lifestyle around our jewellery. Some of those categories, like watches, have grown into substantial businesses in themselves. Sunglasses or fragrances differ by acting like communication tools for the brand itself.

The platform took longer to become profitable than originally planned but is now more profitable than we ever anticipated.

During your talk at Baselworld 2013 you presented a three-part vision of organic growth, development of in-house brands and acquisitions. In terms of possible acquisitions can you reveal the outer framework of what you’re looking at? Apart from the obvious financial requirements what kind of brands and businesses excite you?

The jewellery market in general is huge. We estimate it to about €150B and it’s forecasted to grow approximately 7% per year. It’s also highly fragmented so even Swarovski as heavyweight player has a relatively small market share which leaves a lot of room for growth. What we also see is the continued importance of brands. The fashion industry went through this 20-30 years ago when at one point only 15% of the clothing sold was from a brand rather than non-branded pieces. Today that number is about 70%. Right now only 20% of total jewellery sales around the world are from brands so we have a long way to go until we reach fashion industry percentages.

So that’s where the playground is?

Yes, that’s where the playground is! The tricky part about the acquisition strategy is to find companies that fit our very precise criteria. That is where running a family business can be hard. You can run the numbers, present a company to the shareholders and then they compare them to Swarovski’s and it’s a no. We are competing with some very big brands but also with the lonely girl selling her bracelets at the local market. The unique size and the competition is what keeps this industry interesting.